Software Circle Share Discussion Threads

[zangdook] 09/7/2010 06:47

Perhaps this explains the recent fall. Even allowing for the loss of $3.8m, ISTM we're still trading below net tangible assets. Happy to hold for now.

[stegrego] 09/7/2010 06:43

Not invested here, but have to ask why the hell are they doing ANY forex contracts at all?

Looks like someone fancies themselves as a trader and has messed up big time.

Not good PR for Chinese AIM again.

[matt] 09/7/2010 06:33

Ouch

Trading Update



The Board of Sinosoft has been informed that the Company recently closed certain
foreign exchange contracts which have, in aggregate, resulted in a net loss to
the Company of approximately $3.8 million. The consequence of this is that the
Company expects to report a loss for the first half of 2010 and that the group's
cash and cash equivalents at 30 June 2010 will be materially below the $14.9
million at 31 December 2009 reported in the Company's audited accounts for the
year ended 31 December 2009.

The exact nature of this trading activity is being investigated as the Board is
of the opinion that it had not authorised this level of exposure to foreign
currency derivatives.

[cheeky13] 23/6/2010 13:11

335000 buys today must go up surely .

[davidosh] 19/6/2010 15:35

Thanks Drewz that is excellent. The forecasts seem to be for growth still. How do you see it panning out from here and why do the company need to hold on to so much cash as they could easily afford a better dividend if the growth is not there and cash needed in the business.

[drewz] 19/6/2010 14:41

They've been ploughing revenues back into R&D and held up by delays in the nationwide roll out of the export tax software, where technical problems have caused greater expenditure than expected.

It was expected that once the tax software was installed and de-bugged in one region then it could be quickly replicated at low cost in the rest of the country.

This has proved not to be the case and each region is needing a bespoke installation. All resulting in slower and more expensive installation and therefore lower revenues and tighter margins.

The low shareprice reflects these disappointments and also the realisation that a surge in revenues, expectation of which gave the share such a boost post-ipo, is unlikely to materialise anytime soon.

[davidosh] 19/6/2010 11:08

I copied this from a report on the company from four years ago....


Sinosoft derives a third of its revenues from selling export tax software and the remaining two thirds is generated from sales of e-government software and add-on services. The last set of results for the year to December 2005 revealed a pre-tax profit of $3.38 million on turnover of $6.287 million. The group had cash of $3.3 million at the year end. From the $17 million raised, Sinosoft intends to use $6 million on sales and marketing, $3.8 million on R&D, and will repay a $2.4 million loan. In the current year, analysts are looking for sales of $11.2 million, partly resulting from the government contract win. Profits in the current year are forecasted to come in at $5.46 million. With more territories under control and more local authorities buying the Sinosoft software, profits are expected to increase to $7.1 million on sales of $15.5 million, putting the stock on a single digit PE.


This is how it panned out over the last six years to December 2009


Turnover (m) 4.98 6.16 9.20 10.62 12.08 14.51

Op Profit(m) 2.74 3.55 3.54 4.78 3.29 3.30

Pretax Pr.(m) 2.67 3.46 3.81 5.19 3.79 4.41


Can anyone with good long term knowledge and background here provide a reason why Sinosoft did not meet forecasts as expected and why the margins have been declining so steadily ? That aside are there other reasons for the extremely low valuation compared to NAV considering this company does make actual profits and generates cash albeit slowly as is so often the case with China based companies ?

Many thanks for any help with my research.

[buggy] 16/6/2010 11:45

SPADman,

No downside just have to be prepared to tie down the money for a few years.

Seems to go up in steps after each results then comes down again. Long ternm a solid investment but most people a chasing a quick turnover on their money and not willing to hang around.

Ex dividend today so those that hung around for the divedend are moving on ...no doubt to return again before the final results next year.

Par for courses for most Chinise based company..... not known for constant news flow ... though SFT may well pull out a rabbit out of the bag in terms of an acquisition.

[spadman] 16/6/2010 11:30

I dont get this, have got a few ks worth but thinking of filling up big time... the figures just dont make sense why on earth is SFT so cheap???

Dont agree that being cash rich is so bad either for above reasons... does anyone know any downside that justifies the lowly rating?

[contrarian2investor] 28/5/2010 10:44

charlie

I agree that is always best to be cash rich, especially in this environment. SFT could easily double its footprint with a shrewd acquisition and therefore enhance the share price folllowing increased profits. This would be far more beneficial to all shareholders than a special one off distribution.

I completely disagree with the statement, "too much cash and no priority to dividends will lead to stupid acquisitions". Why would that be the case? Please explain that theory for us?

It always pays to be prudent and also patient. During which time we all continue to receive a dividend from a growing entity. Not many mirco-caps on the AIM (or for that matter the FTSE)can provide such potential. If you know of any please share them with us. TIA

c2i

[charlie] 28/5/2010 09:02

They could pay a much higher dividend and still have plenty for sensible acquisitions.

Too much cash and no priority to dividends will lead to stupid acquisitions.

[gazza102] 28/5/2010 08:00

Totally agree buggy spend the cash on income/profit generating, not special dividend etc.

Then watch the share price go up.

[buggy] 27/5/2010 21:31

Charlie,

Not quite sure I agree that they should empty the coffers. A good reserve of cash means that they can take advantage of any acquisition opportunity for cash without the need to issue more shares.

Noted that they made mention of acquisition in their AGM statement. I don't think that they have done that before... so they are in acquisitive mode if a good opportunity materialises.

[charlie] 27/5/2010 18:31

AGM statement looked OK.

Cash generated from operations $7m in 2009, $4m in 2008, $2.7m in 2007.

So why do they need to keep $14.9m cash on the balance sheet? $4.4m loan to a property developer (accounts note 14) coming back in August 2010 as well.

The dividend of 0.31p absorbs just $0.75m at current exchange rates.

Great little company, but weighed down by too much cash! They should dole some more out to the shareholders. A special dividend, or increase the dividend, or buybacks, or something.

[contrarian2investor] 21/4/2010 14:20

zangdook,

Welcome, plenty more baggers to come if you are patient enough.Their explosive growth that I was expecting from Jan 09 has not arrived yet, but when it does we should see SFT much higher. Furthermore SFT's diverse applications have not even really got going yet.

I'll be holding for the long-term.

c2i

[zangdook] 21/4/2010 13:51

I've very nearly doubled my money in less than a year.

[drewz] 21/4/2010 12:11

Yeah. Sinosoft = the new Chinese Microsoft; that's what they were saying at IPO back in 2006. Fat lot of good it did.

It would not surprise me at all for this still to be sub IPO price in 3 years time. Their sales growth is proceeding at a glacial pace.

Far better opportunities to make money elsewhere, imho.

[charlie] 21/4/2010 09:40

edited - email address

[explorer88] 21/4/2010 08:45

morning buggy - only in your short term analysis of H1, extrapolating from H2.

whilst SAT may be important, don't underestimate other growth areas - especially their RFID work ;-)

[buggy] 21/4/2010 08:13

explorer,


Thought that you think I was being over exuberant. I think we will see 10X the current price in less than 5 years.

Once SAT comes on there will be a step change in TO. The economic downturn was a blessing in disfuise for SFT as it forced them to diversify, before that they were overly dependent on SAT.

I am also pleased with the apointment of a new Chairman, may help take the conmpany to a new level.( Not that I have any problem with the previous one, but founding members are not always best suited for moving a company to the next level, sometimes the injection of new idea and new blood is required).

[explorer88] 21/4/2010 07:56

I've been in regular contact with Sinosoft and know their business pretty well.

I have no doubt that Sinosoft will become a £75m - £150m m/c company over time 5x - 10x current m/c

Like one or two others i have built a large long term holding in the business

GLA

[stewolf] 21/4/2010 07:41

Just looked in after being on hols (took ages to get back!) and what a pleasant surprise. Steady as she goes (with a pick up in H2) and another divi to collect.